Disciplinary and Other FINRA Actions...Bluechip Securities, Inc. (CRD® #45726, Houston, Texas) and...

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Disciplinary and Other FINRA Actions

FINRA has taken disciplinary actions against the following firms and individuals for violations of FINRA rules; federal securities laws, rules and regulations; and the rules of the Municipal Securities Rulemaking Board (MSRB).

Reported for August 2011Firms Fined, Individuals SanctionedBluechip Securities, Inc. (CRD® #45726, Houston, Texas) and Muhammad Akram Khan, (CRD #1400089, Registered Principal, Houston, Texas) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $15,000. Khan was fined $385,000 and suspended from association with any FINRA® member in any capacity for 18 months. In assessing the fine, financial benefits Khan obtained were considered. The fine must be paid either immediately upon Khan’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, the firm and Khan consented to the described sanctions and to the entry of findings that Khan engaged in excessive trading in the accounts of his member firm’s customers; Khan effected transactions and generated approximately $380,296 in commission charges. The findings stated that the customers’ accounts incurred losses of approximately $399,000; the annualized commission-equity ratio for one customer’s account was approximately 22,131 percent and the commission-equity ratio for the other customer’s account was approximately 450 percent. The findings also stated that Khan executed, or caused the execution of, options transactions at prices that were unfair, in that the commissions charged on such transactions were excessive in light of all factors relevant to the transactions; the trades involved opening and closing transactions in listed index options traded on an options exchange, for which immediate execution was obtained through the firm’s clearing firm. The findings also included that Khan recommended opening options transactions to his firm’s customers without having reasonable grounds to believe that the recommended transactions were suitable for the customers; further, Khan did not have a reasonable basis for believing that the customers had such knowledge and experience in financial matters that they could reasonably be expected to be capable of evaluating the risks of the transactions, and that they were financially able to bear the risks of the recommended positions in the options contracts.

FINRA found that Khan exercised discretion in executing options transactions in customers’ accounts; none of the customers provided Khan or the firm with written authorization to exercise discretion in their accounts and none of the accounts were accepted by the firm or a registered options principal in writing as discretionary accounts. FINRA also found that the firm was required to conduct an independent test of its Anti-Money Laundering (AML) Compliance Program (AMLCP); pursuant to Interpretative Material (IM) 3011-1, an individual with a working knowledge of applicable requirements of the

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Bank Secrecy Act and implementing its regulations was required to conduct the test. In addition, FINRA determined that during one year, Khan, who is the firm’s AML Compliance Officer and therefore not independent, conducted the test; and during another year, the test was conducted by an individual who did not have a working knowledge of applicable requirements of the Bank Secrecy Act and implementing its regulations—therefore, Khan failed to cause the firm to conduct an independent test of its AML Compliance Program. Moreover, FINRA found that the firm, acting through Khan, failed to maintain accurate books and records, in that the firm failed to prepare and maintain accurate net capital computations. Furthermore, FINRA found that the firm, acting through Khan, conducted a securities business while failing to maintain the required minimum net capital; some violations were caused by the mischaracterization of certain items as allowable assets when such items were properly classified as non-allowable assets, and one violation involved the firm’s failure to take into account certain liabilities in calculating its net capital. The findings also stated that Khan sent and received electronic communications to and from a customer, in the form of text messages, related to the firm’s business; as such the firm did not preserve these communications in the manner Securities and Exchange Act Rule 17a-3 required. The findings also included that the firm, acting through Khan, filed inaccurate quarterly Financial and Operational Combined Uniform Single (FOCUSTM) Reports because they included inaccurate net capital computations. FINRA found that the firm did not maintain the minimum net capital required by SEC Rule 15c3-l; the firm, acting through Khan, failed to provide notice of its net capital deficiency to FINRA and the SEC pursuant to SEC Rule 17a-11.

The suspension is in effect from July 5, 2011, through January 4, 2013. (FINRA Case #2009016264301)

Deutsche Bank Securities Inc. (CRD #2525, New York, New York) and Adrienne Barrett Tubridy (CRD #1570968, Registered Supervisor, Marblehead, Massachusetts) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $350,000. In assessing the fine, FINRA took into account financial benefits the firm obtained, and the firm’s discovery, reporting, investigation and corrective measures are reflected in the sanctions. Turbridy was fined $10,000, suspended from association with any FINRA member in any supervisory capacity for 10 days and required to cooperate with FINRA in its prosecution of any other disciplinary action related to these events by, among other things, meeting with and being interviewed by FINRA staff without the need of staff to resort to FINRA Rule 8210, and testifying truthfully at any related hearing.

Without admitting or denying the findings, the firm and Tubridy consented to the described sanctions and to the entry of findings that the firm held contractual agreements with third-party investment advisers who provided financial services to firm customers through the firm’s adviser select program for a fee the customers paid, and the firm customers granted discretionary trading authority to the third-party advisers. The findings stated

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that the agreements contained a confidentiality clause prohibiting firm employees from using the third-party advisers’ portfolio recommendations for other clients. The findings also stated that the firm instituted a written policy and procedure manual distributed to firm employees, including Tubridy, that contained guidelines related to the adviser select account and prohibited shadowing adviser select accounts, but the firm did not implement any specific systems to detect and prevent shadowing; no exception reports were created to identify shadowing, no applicable training was conducted, and no supervisory systems were put in place to monitor accounts for possible shadowing. The findings also included that in one branch office while Tubridy was responsible for performing trade reviews, shadowing was egregious and continued for years.

FINRA found that even though the firm did not implement exception reports to identify shadowing, shadowed trades were flagged for other reasons, which required Tubridy to follow up; she examined and approved shadowed trades on the exception reports, made notations on certain trades, which indicated an awareness of shadowing, but failed to follow up on the information and neglected to raise the issue with compliance or her supervisors. FINRA also found that through shadowing, firm registered representatives circumvented the fee arrangement the firm had in place for the adviser select program and violated the provisions of confidentiality agreements prohibiting the use of the third-party investment advisers’ proprietary information. In addition, FINRA determined that the firm and involved registered representatives failed to pay a combined total of over $200,000 to third-party investment advisers. Moreover, FINRA found that the firm failed to establish, maintain and enforce an adequate supervisory system to detect and prevent shadowing, and Tubridy failed to recognize and follow up on “red flags” of shadowing. Furthermore, FINRA found that once the firm learned that shadowing had occurred, with Tubridy’s assistance, it conducted an extensive and immediate internal investigation across all branch offices to identify and halt any other shadowing activity.

The suspension was in effect from August 1, 2011, through August 10, 2011. (FINRA Case #2008013864402)

Firm and Individual FinedTrustmont Financial Group, Inc. (CRD #18312, Greensburg, Pennsylvania) and Peter Daniel Dochinez (CRD #1062112, Registered Principal, Delmont, Pennsylvania) submitted a Letter of Acceptance, Waiver and Consent in which the firm and Dochinez were censured and fined $10,000, jointly and severally. The firm was fined an additional $20,000. Without admitting or denying the findings, the firm and Dochinez consented to the described sanctions and to the entry of findings that the firm failed to develop and enforce written procedures reasonably designed to achieve compliance with NASD® Rule 3010(d)(2) regarding the review of electronic correspondence. The findings stated that although the firm had certain relevant procedures in place, it did not have a satisfactory system for



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providing designated principals with access to such correspondence for review; instead, the firm relied on registered representatives to forward any emails involving customers to a central email address, which was accessible to the firm’s president and chief compliance officer (CCO), for review. The findings also stated that the firm did not have effective procedures to monitor its representatives’ compliance with the email forwarding requirement; instead the firm relied on branch inspections to monitor compliance, but, because the firm’s branch offices were non-Office of Supervisory Jurisdiction’s (OSJs), they were inspected infrequently—once every three years. The findings also included that during the infrequent branch office inspections, the firm generally failed to conduct adequate reviews of representatives’ personal computers to determine if they were complying with the email forwarding requirement; other than some very limited reviews during the inspections, the firm failed to provide for surveillance and follow-up to ensure that email correspondence review procedures were implemented and adhered to.

FINRA found that the firm failed to enforce its written procedures requiring a designated principal to conduct a daily review of business-related electronic correspondence and to evidence that review by initialing the correspondence. FINRA also found that the firm, acting through Dochinez, the firm’s president, chief executive officer (CEO) and a firm principal, failed to establish, maintain and enforce an adequate system of supervisory control policies and procedures that tested and verified that its supervisory procedures were reasonably designed with respect to the activities of the firm, its registered representatives and associated persons to achieve compliance with applicable securities laws and regulations, and created additional or amended supervisory procedures where the need was identified by such testing and verification. In addition, FINRA determined that the firm’s supervisory control policies and procedures failed to address the requirements of designating a principal responsible for the firm’s supervisory control policies and procedures; testing and verification to ensure reasonably-designed supervisory procedures; updating the firm’s written supervisory procedures (WSPs) to address deficiencies noted during testing; designating a principal responsible for the annual report to senior management on the firm’s system of supervisory controls procedures, summary of test results, significant identified exceptions, and any additional or amended procedures; identifying producing managers and assigning qualified principals to supervise such managers; using the “limited size and resources” exception for producing managers’ supervision, including documenting the factors relied on in determining that the exception is necessary; electronically notifying FINRA of its reliance on the limited size and resources exception; reviewing and monitoring all transmittals of customer funds and securities; reviewing, monitoring and validating customer changes of address and customer changes of investment objectives; and providing heightened supervision over each producing manager’s activities. Moreover, FINRA found that the firm, acting through Dochinez, failed to conduct independent tests of its AMLCP. (FINRA Case #2009016311801)

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Firms FinedAufhauser Securities, Inc. (CRD #39673, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $21,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to timely report Reportable Order Events (ROEs) to the Order Audit Trail System (OATSTM) and failed to transmit ROEs to OATS for more than a year. (FINRA Case #2008014869501)

Barclays Capital, Inc. (CRD #19714, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $10,000 and required to report to the Trade Reporting and Compliance EngineTM (TRACETM) the transactions it had not previously reported. Within 30 business days of the National Adjudicatory Council’s (NAC) acceptance of the AWC, a registered principal of the firm shall submit to FINRA a representation that the firm has reported the previously unreported transactions to TRACE and the date they were reported. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to report transactions in TRACE-eligible securities that it was required to report to TRACE. The findings stated that the firm failed to report the correct contra-party’s identifier for transactions in TRACE-eligible securities to TRACE. (FINRA Case #2009019847301)

Biremis, Corp. (CRD #127840, Boston, Massachusetts) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $25,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it transmitted ROEs to OATS that OATS rejected for context or syntax errors and were repairable, but the firm failed to repair all of the rejected repairable ROEs and as a result, it failed to transmit ROEs to OATS during that calendar quarter. The findings stated that the firm failed to timely report ROEs to OATS, and transmitted Route or Combined Order/Route Reports to OATS that the OATS system was unable to link to the related order routed to NASDAQ or to the corresponding new order the destination member firm transmitted due to inaccurate, incomplete or improperly transmitted data. (FINRA Case #2008015905701)

BNP Paribas Securities Corp. (CRD #15794, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $12,500. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to report short interest positions to FINRA for a settlement date and reported short interest positions incorrectly. (FINRA Case #2008014672401)

Cantor Fitzgerald & Co. (CRD #134, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $12,500. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of

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findings that it failed to accurately report the trade time for transactions to the Real-time Transaction Reporting System (RTRS) for all customer transactions reviewed. The findings stated that the firm failed to maintain accurate order tickets for some corporate bond transactions; the firm failed to record the receipt time on the order tickets, and some of the order tickets did not reflect the accurate terms and conditions of the order (i.e. capacity). (FINRA Case #2009016134601)

Capstone Global Markets, LLC (CRD #143612, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $10,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it reported last sale reports of transactions in designated securities to the FINRA/NASDAQ Trade Reporting Facility® (FNTRF) it was not required to report. (FINRA Case #2009020099101)

Charles Schwab & Co., Inc. (CRD #5393, San Francisco, California) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $12,500. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to report information regarding transactions effected in municipal securities to the RTRS within 15 minutes of trade time to an RTRS Portal, and failed to report the correct execution time to the RTRS for some of these transactions. (FINRA Case #2009018114601)

Eroom Securities L.L.C. (CRD #41257, Chicago, Illinois) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $32,500 and required to revise its WSPs regarding OATS reporting. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that on numerous business days, it failed to transmit most of its ROES to OATS that it was required to transmit. The findings stated that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules concerning OATS reporting. (FINRA Case #2008013159601)

Fieldstone Services Corp. (CRD #27851, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $40,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to report transactions in TRACE-eligible securities to TRACE within 15 minutes of the execution time. The findings stated that the firm failed to report the correct trade execution time for transactions in TRACE-eligible securities to TRACE, and failed to show the execution time on brokerage order memoranda. The findings also stated that the firm failed to enforce its WSPs, which specified that the firm would review all TRACE-eligible transactions as well as TRACE quality of market report cards on a monthly basis to determine whether trades were properly reported. The findings also included that the firm failed to report transactions in TRACE-eligible securities that it was required to report to TRACE. FINRA found that the firm failed to report the correct

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trade execution time or date, the correct contra-party’s identifier, the correct price, the correct volume, the correct contra-party, the correct Committee on Uniform Securities Identification Procedures (CUSIP), or the correct buy/sell indicator for transactions in TRACE-eligible securities to TRACE. (FINRA Case #2009019353001)

Finance 500, Inc. (CRD #12981, Irvine, California) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $30,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it executed transactions in reportable securities and failed to report each of the transactions to the FNTRF or to the Over-The-Counter Reporting Facility (OTCRF) with the correct symbol indicating whether the transaction was a buy, sell, sell short or cross. The findings stated that the firm transmitted reports to OATS that contained inaccurate, incomplete or improperly formatted data, in that all the reports omitted the special handling code for directed orders. The findings also stated that the firm failed to transmit a Desk Report to OATS for orders that were routed between the firm’s agency and market-making desks. The findings also included that the firm made available reports on covered orders in national market system securities that it received for execution from any person, and the firm’s report included incorrect information. (FINRA Case #2009016618601)

The Frazer Lanier Company, Incorporated (CRD #7089, Montgomery, Alabama) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $20,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that a municipality sought to issue municipal bonds and retained the firm as the underwriter. The findings stated that in connection with the issuer’s efforts to obtain favorable credit ratings for its bond offerings, the municipality’s mayor and a principal from the firm made trips to meet with analysts from the credit rating agencies; both individuals took relatives on these trips although none were involved in meetings relating to the municipal bond credit ratings. The findings also stated that the firm advanced payment for some of the relatives’ expenses. The findings also included that the firm sought and obtained reimbursement for the expenses from the proceeds of the municipal bond offerings; the unwarranted expense reimbursements for the relatives was $3,838.17, which the firm has since repaid the municipality.

FINRA found that advancing payment by the firm of the mayor’s relative’s expenses and subsequent reimbursement of the expenses to the firm from the proceeds of the municipal issues resulted in a benefit to the issuer official that exceeded the limits of MSRB Rule G-20 and was not covered by the rule’s exception for normal business dealings. FINRA also found that the expenses incurred by the firm principal’s relatives were not legitimate business expenses, and the firm’s submission and receipt of reimbursement of the expenses from the proceeds of the bond issues constituted deceptive, dishonest and unfair practices under MSRB Rule G-17. In addition, FINRA determined that the firm failed to adequately supervise the conduct of its municipal securities business and the municipal securities activities of its associated persons to ensure compliance with MSRB rules and applicable



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provisions of the Securities Exchange Act of 1934, and failed to adopt, maintain and enforce WSPs reasonably designed to ensure compliance with the same rules and exchange act provisions. Moreover, FINRA found that the firm failed to adequately review the expense reimbursements to determine whether they complied with the firm’s obligations under MSRB Rules G-17 and G-20. Furthermore, FINRA found that the firm failed to adopt, maintain and enforce WSPs setting forth guidelines for reimbursement of ratings trip expenses. (FINRA Case #2010021263901)

Gates Capital Corporation (CRD #29582, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $17,500. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to report the correct trade time to the RTRS in reports of transactions in municipal securities. The findings stated that the firm failed to report information regarding transactions effected in municipal securities to the RTRS within 15 minutes of trade time to an RTRS Portal. The findings also stated that the firm failed to show the correct execution time on the memoranda of transactions in municipal securities. The findings also included that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and MSRB rules concerning municipal securities transaction reporting. (FINRA Case #2010021788801)

Goldman, Sachs & Co. (CRD #361, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $27,500. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to report the correct contra-party’s identifier for transactions in TRACE-eligible securities to TRACE, and failed to report transactions in TRACE-eligible securities to TRACE within 15 minutes of the execution time. (FINRA Case #2008016374901)

Great Point Capital LLC (CRD #114203, Chicago, Illinois) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $10,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to timely report numerous ROEs to OATS and transmitted Route or Combined Order/Route Reports to OATS that the OATS system was unable to link to the corresponding new order the destination member firm transmitted due to inaccurate, incomplete or improperly formatted data. (FINRA Case #2009018158401)

Indiana Merchant Banking and Brokerage Co., Inc. (CRD #16315, Indianapolis, Indiana) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $20,000. FINRA imposed a lower fine after it considered, among other things, the firm’s size, revenues and financial resources. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to evidence any review of incoming or outgoing written and electronic correspondence; the



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firm failed to review the incoming and outgoing electronic correspondence of its CCO’s personal email account that he used to conduct securities related business, and the CCO had business cards with his personal email address included. The findings stated that the firm failed to maintain its electronic correspondence (email) and electronic internal communications (email) for almost two years, and failed to maintain the incoming and outgoing electronic communications of an individual’s personal email account used to conduct business. The findings also stated that the firm failed to notify FINRA prior to employing electronic storage media. The findings also included that the firm failed to file an attestation by at least one third party who has access and the ability to download information from its electronic storage media to an acceptable media for such records that are exclusively stored electronically. FINRA found that the firm’s electronic storage media failed to have in place an audit system providing for accountability regarding inputting of records required to be maintained and preserved, and inputting of any changes to every original and duplicate record maintained and preserved. FINRA also found that the firm failed to evidence the disclosure of its privacy notice upon account opening and annually thereafter; although the firm produced a privacy policy and procedures, it failed to provide initial, annual and revised privacy notices. (FINRA Case #2009016067901)

J.H. Darbie & Co., Inc. (CRD #43520, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $11,500 and required to revise its WSPs regarding OATS reporting. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to timely report all of its ROEs to OATS during a review period. The findings stated that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules concerning OATS reporting. (FINRA Case #2009018266501)

J.P. Morgan Securities LLC (CRD #79, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $147,500 and ordered to pay $13,792.94, plus interest, in restitution to investors. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to execute orders fully and promptly, and in some of the transactions for or with a customer, it failed to use reasonable diligence to ascertain the best inter-dealer market, and failed to buy or sell in such market so that the resultant price to its customer was as favorable as possible under prevailing market conditions. The findings stated that the firm transmitted ROEs to OATS that OATS rejected for context or syntax errors and were repairable, but the firm failed to repair many of them, so they were not transmitted to OATS; the firm also failed to repair some within the required five business days. The findings also stated that the firm failed to populate the Rejected ROE Resubmit Flag with a “Y” for some ROEs. The findings also included that the firm effected transactions in securities while a trading halt was in effect with respect to each of the securities.



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FINRA found that the firm failed to timely report ROEs to OATS; transmitted Route or Combined Order/Route Reports to OATS that the OATS system was unable to link to the related order routed to NASDAQ, or was unable to link to the corresponding new order the destination member firm transmitted due to inaccurate, incomplete or improperly formatted data; transmitted Execution or Combined Order/Execution Reports to OATS that the OATS system was unable to link the execution reports to the related trade reports in an NASD trade reporting system due to inaccurate, incomplete or improperly formatted data; transmitted New Order Reports and related subsequent reports to OATS where the timestamp for the related subsequent report occurred prior to the receipt of the order, and because of the inaccurate timestamps, the OATS system was unable to create an accurate, time-sequenced record from the receipt of the order through its resolution; and was named as the Sent To Firm on Route or Combined Order/Route Reports other members transmitted that OATS was unable to match to a related New Order Report the firm submitted. FINRA also found that the firm accepted and held customer market orders, traded for its own account at prices that would have satisfied the customer market orders, and failed to immediately thereafter execute the customer market orders or execute them up to the size and at the same price at which it traded for its own account or at a better price. In addition, FINRA determined that the firm failed to report information regarding transactions effected in municipal securities to the RTRS within 15 minutes of trade time to an RTRS Portal. Moreover, FINRA found that the firm improperly reported information to the RTRS that it was not required to report. Furthermore, FINRA found that the firm failed to transmit ROEs to OATS by failing to submit numerous Desk Reports, and in one instance, failed to report a special handling code.

The findings also stated that the firm failed to report transactions in TRACE-eligible securities to TRACE within 15 minutes of the execution time. The findings also included that the firm transmitted reports to OATS that contained inaccurate, incomplete or improperly formatted data; the firm incorrectly submitted Route Reports to OATS, submitted incorrect reporting exception codes and in one instance, failed to submit data for an order to OATS. FINRA found that the firm failed, within 90 seconds after execution, to transmit to the OTCRF last sale reports of transactions in OTCTM equity securities; the firm failed, within 90 seconds after execution, to transmit to the OTCRF last sale reports of transactions in OTC equity securities and the firm failed, within 90 seconds after execution, to transmit to the OTCRF last sale reports of transactions in OTC equity securities and failed to designate them as late to the OTCRF. FINRA also found that the firm failed to report the correct execution time in last sale reports of transactions in OTC equity securities to the OTCRF. FINRA found that the firm failed, within 90 seconds after execution, to transmit to last sale reports of transactions in designated securities to the FNTRF, and the firm failed, within 90 seconds after execution, to transmit last sale reports of transactions in designated securities to the FNTRF and failed to designate some of them as late; the firm failed to report the correct execution time for last sale reports in designated securities to the FNTRF and incorrectly designated last sale reports of transactions in designated securities as “.PRP.” (FINRA Case #2006005335801)



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LPL Financial LLC (CRD #6413, Boston, Massachusetts) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $25,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that a firm representative submitted a written request to conduct a live call-in finance- and investment-related radio show to be broadcast in Farsi; the firm had various written procedures relating to the supervision of its representatives’ public appearances, which, among other things, required that the first three radio shows be submitted to the firm’s advertising compliance department as soon as they had aired and that the advertising compliance department would contact representatives quarterly to request copies of specific shows during a randomly chosen date range for review. The findings stated that the firm approved the representative’s request and required the representative to provide a translated copy of the show upon a quarterly request, and an unaffiliated third-party translation company was to complete the translation. The findings also stated that for five years, the representative, together with another representative, aired approximately 520 shows on a particular radio station; the format was typically a live call-in show, in Farsi, discussing financial issues and investments, but the firm failed to request or review copies or transcripts of the broadcasts. (FINRA Case #2010021545201)

Midtown Partners & Co., LLC (CRD #104223, New York, New York) submitted an Offer of Settlement in which the firm was censured and fined $30,000. Without admitting or denying the allegations, the firm consented to the described sanctions and to the entry of findings that it failed to have a supervisory system reasonably designed to detect and prevent the misuse of material, nonpublic information by employees through an information barriers system. The findings stated that the firm did not have WSPs addressing the creation or distribution of a watch list, which is a list of securities whose trading is subject to close scrutiny by a firm’s compliance or legal department, and the firm did not maintain any list of this nature. The findings also stated that the firm maintained a restricted list but it was not maintained in the manner its own procedures required; securities were added to the list in a haphazard manner, often after the issuer had signed a private placement agent agreement with the firm. The findings also included that the list did not reflect when a security was added or deleted from the list, and did not identify the contact person.

FINRA found that the firm did not adequately monitor employee trading outside the firm for transactions in the restricted-list securities; the firm permitted employees to maintain securities accounts with other broker-dealers, requiring any employee to have duplicate confirmations and account statements sent to the firm. FINRA also found that firm employees were required to disclose their outside accounts to the firm upon hire and annually in an attestation form, but the firm failed to obtain annual attestations from some employees and did not ensure that it was receiving the required duplicate confirmations and account statements. In addition, FINRA determined that because the firm failed to maintain a watch list, to timely add securities to its restricted list, to



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record the required restricted list information, and to obtain confirmations and account statements for employee accounts, it could not reasonably monitor its employees’ trading for transactions in restricted or watch-list securities. Moreover, FINRA found that the firm did not have procedures to restrict the flow of material, nonpublic information and routinely shared restricted-list information with unregistered individuals who were firm owners, and occasionally shared with these unregistered individuals the details of investment banking contracts; consequently the firm’s procedures were not reasonably designed to prevent violation of securities rules prohibiting insider trading. (FINRA Case #2008012242901)

MML Investor Services, LLC (CRD #10409, Springfield, Massachusetts) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $32,500. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it purchased or sold TRACE-eligible securities as agent for a customer in over-the-counter transactions for a commission or service charge that was in excess of a fair amount, taking into consideration all relevant circumstances, including market conditions with respect to such security at the time of the transaction, the expense of executing the order and the value of any service rendered by reason of experience in, and knowledge of, such security and the market. The findings stated that the firm failed to enforce its WSPs by charging commissions in excess of the procedure’s limits. (FINRA Case #2009019499901)

Morgan Stanley & Co. Incorporated nka Morgan Stanley & Co. LLC (CRD #8209, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $575,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to establish and/or enforce adequate WSPs, and failed to adequately supervise total return swaps and off-shore stock loans. The findings stated that these transactions were designed to generate for certain off-shore clients a perceived tax advantage related to dividend income on U.S. equities. The findings also stated that the advantage was referred to as various terms, including “yield enhancement,” and represented the amount that would have been withheld in taxes on a dividend, but that the client obtained through a transaction with the firm and/or its affiliates; but in both types of transactions, the client did not hold the stock on the dividend record date but, instead, the firm structured the transaction as a swap or loan, and provided yield enhancement as part of a securities derivative or stock loan-related payment.

The findings included that some clients sold the underlying equity before entering the swap, and bought the equity back after the swap terminated. The findings also included that, in such circumstances, yield-enhancement payments were appropriate only if the client surrendered beneficial ownership of the underlying equity during the life of the swap and engaged in market risk in the buying and selling of the equity. The findings



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further included that the firm was unable to substantiate the propriety of some yield enhancement payments because of supervisory deficiencies in the use of “crosses,” short-term transactions and market-on-close pricing; and in a cross, the firm and its counterparty conducted securities transactions directly with one another, and executed them in the over-the-counter market.

FINRA found that the firm allowed its clients to both “cross in” and “cross out” on securities transactions that were related to the swap transactions. In addition, FINRA found that allowing clients to do this, particularly in trades that bracketed the dividend record dates, enabled these clients to re-establish their original securities position after the swap terminated in a manner that minimized the clients’ market risk. FINRA further found that the firm’s procedures failed to prevent customers from unwinding a swap at the closing price of the underlying equity, which also allowed clients to re-establish their securities positions at minimal market risk. Furthermore, FINRA found that regarding off-shore stock loans, the firm failed to establish WSPs and lacked effective working control of business operations that involved firm clients, client securities that were custodied in accounts at the firm, and firm personnel. FINRA also found that the firm allowed affiliates to initiate and conduct the off-shore stock loan transactions without sufficient oversight from the firm; and as a result, the firm was unable to supervise this aspect of its business and substantiate that these transactions were conducted in a manner that made certain the yield-enhancement payments were appropriate. The findings also included that after the firm reviewed its off-shore stock loans, it determined to stop sourcing U.S. equities from its off-shore customers for such transactions because of the firm’s concerns about its ability to maintain adequate controls over these operations. (FINRA Case #2008015717101)

Polar Investment Counsel, Inc. (CRD #42847, Thief River Falls, Minnesota) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $10,000 and ordered to pay $3,938.64, plus interest, in restitution to customers. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that in pairs of contemporaneous principal transactions, it sold municipal securities for its own account to a customer at an aggregate price (including any markup) that was not fair and reasonable, taking into consideration all relevant factors, including the best judgment of the broker, dealer or municipal securities dealer as to the fair market value of the securities at the time of the transaction and of any securities exchanged or traded in connection with the transaction, the expense involved in effecting the transaction, the fact that the broker, dealer or municipal securities dealer is entitled to a profit, and the total dollar amount of the transaction. (FINRA Case #2009017748901)

Pritchard Capital Partners, LLC (CRD #100480, Covington, Louisiana) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $10,000 and required to revise its WSPs with respect to OATS reporting. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that

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it failed to transmit ROEs to OATS on numerous business days. The findings stated that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules concerning OATS reporting. (FINRA Case #2009017830501)

Samuel A. Ramirez & Co., Inc. (CRD #6963, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $10,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to accurately report the details of certain corporate bond transactions to TRACE. The findings stated that the firm reported a percentage of its TRACE-eligible corporate bond transactions in the wrong capacity; these transactions were reported with the firm acting as agent when, instead, it had acted as principal. The findings also stated that a transaction was reported with an incorrect contra-party Market Participant ID (MPID), and transactions were incorrectly reported as broker-dealer transactions when they should have been reported as customer transactions. The findings also included that the firm executed corporate bond transactions for customers and failed to ensure delivery of confirmations for some of those transactions, each of which was effected for a single investment-advisor subaccount. FINRA found that this failure, which was due to human error, further resulted in the firm’s failure to make and keep such confirmations as required under SEC and FINRA rules. (FINRA Case #2010020993801)

Seattle-Northwest Securities Corporation (CRD #10639, Seattle, Washington) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $10,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to report information regarding transactions effected in municipal securities to the RTRS within 15 minutes of trade time. (FINRA Case #2009017092601)

Statetrust Investments Inc. (CRD #104651, Miami, Florida) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $12,500. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to report the correct trade execution time for transactions in TRACE-eligible securities to TRACE. The findings stated that the firm failed to report transactions in TRACE-eligible securities to TRACE within 15 minutes of the execution time. The findings also stated that the firm failed to enforce its WSPs, which specified that the CCO would review the TRACE Quality of Market Report Card for exceptions, document evidence of the review with initials and dates, and document any action taken based on the review. (FINRA Case #2010021642701)

UBS Securities LLC (CRD #7654, Stamford, Connecticut) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $42,500. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it transmitted ROEs to OATS that OATS rejected for context or syntax



August 2011

errors and were repairable, but the firm failed to repair some of these rejected ROEs, so it failed to transmit them to OATS during the review period. The findings stated that the firm failed to repair some of the ROEs within the required five business days. The findings also stated that the firm failed to transmit all of its ROEs to OATS on numerous business days for approximately 18 months for a specific MPID. The findings also included that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules concerning OATS reporting for the specific MPID. (FINRA Case #2008015901501)

Wayne Hummer Investments L.L.C. (CRD #875, Chicago, Illinois) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $10,000 and ordered to pay $2,014.89, plus interest, in restitution to customers. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that in pairs of transactions, it sold municipal securities for its own account to a customer at an aggregate price (including any markup) that was not fair and reasonable, taking into consideration all relevant factors, including the best judgment of the broker, dealer or municipal securities dealer as to the fair market value of the securities at the time of the transaction and of any securities exchanged or traded in connection with the transaction, the expense involved in effecting the transaction, the fact that the broker, dealer or municipal securities dealer is entitled to a profit, and the total dollar amount of the transaction. (FINRA Case #2009018305401)

Wells Fargo Advisors, LLC (CRD #19616, St. Louis, Missouri) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $20,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to report the correct yield to the RTRS in reports of transactions in municipal securities. The findings stated that the firm failed to provide written notification disclosing to its customer the correct lowest effected yield in most of these municipal securities transactions. (FINRA Case #2009020728001)

Individuals Barred or SuspendedSalvador Almonte (CRD #4968858, Registered Representative, Brooklyn, New York) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 15 business days. Without admitting or denying the findings, Almonte consented to the described sanctions and to the entry of findings that he purchased shares of an exchange-traded fund (ETF) in the account belonging to customers of his member firm without their knowledge, authorization or consent. The findings stated that this purchase of ETF shares resulted in a deduction of $4,914 from the customers’ account.

The suspension was in effect from June 20, 2011, through July 11, 2011. (FINRA Case #2009018047201)

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Richard Annichiarico (CRD #4286994, Registered Representative, Croton, New York) submitted an Offer of Settlement in which he was suspended from association with any FINRA member in any capacity for one year. In light of Annichiarico’s financial status, no monetary sanctions were imposed. Without admitting or denying the allegations, Annichiarico consented to the described sanction and to the entry of findings that he engaged in check kiting when he wrote personal checks while knowing that there were insufficient funds to cover them. The findings stated that Annichiarico wrote each of the checks to himself and deposited them via automatic teller machine (ATM), in amounts ranging from $100 to $1,000, to create a provisional credit in his own bank account which he used to withdraw cash via ATM. The findings also stated that the checks returned for insufficient funds totaled $5,380. The findings also included that Annichiarico’s account was cured by subsequent deposits and was assessed returned check fees, which were paid. FINRA found that Annichiarico failed to timely respond to FINRA requests for information and documents.

The suspension is in effect from June 6, 2011, through June 5, 2012. (FINRA Case #2009019439101)

Dennis Osborn Beadle (CRD #1137908, Registered Representative, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for one month. Without admitting or denying the findings, Beadle consented to the described sanctions and to the entry of findings that he used an answer key to complete a state insurance continuing education (CE) exam. The findings stated that certain states began requiring financial advisors to complete a long-term care (LTC) CE course and exam before selling LTC insurance products to customers who reside in those states. The findings also stated that Beadle was advised that he would be required to complete the LTC CE exam for a particular state before he was able to complete the sale of a policy to a colleague’s relative. The findings also included that Beadle received an email from a wholesaler that included a copy of the state’s LTC CE exam questions, with the answers filled in by hand. FINRA found that Beadle used the answer key to complete the state’s LTC CE exam.

The suspension was in effect from July 5, 2011, through August 4, 2011. (FINRA Case #2009021029706)

Harold Edwin Bissett Jr. (CRD #858422, Registered Principal, New Bern, North Carolina) submitted an Offer of Settlement in which he was fined $2,500 and suspended from association with any FINRA member in any capacity for five business days. Without admitting or denying the allegations, Bissett consented to the described sanctions and to the entry of findings that he exercised discretion in a customer’s account without the customer’s written authorization and his member firm’s acceptance of the account as discretionary.

The suspension was in effect from July 5, 2011, through July 11, 2011. (FINRA Case #2009016924901)



August 2011

Aaron Lee Boehm (CRD #3232128, Registered Supervisor, Bend, Oregon) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 30 days. Without admitting or denying the findings, Boehm consented to the described sanctions and to the entry of findings that he entered into a handwritten agreement with a customer of his member firm wherein he agreed to provide financial advisory services to the customer in exchange for older vehicles, which the customer sold to him at a discounted price. The findings stated that Boehm entered into the business agreement to provide financial advisory services, outside the scope of his relationship with his firm, and without first notifying the firm or obtaining the firm’s written approval of the arrangement. The findings also stated that the firm’s WSPs specifically prohibited registered representatives from entering into outside employment or business activities without obtaining the firm’s prior approval.


Howard Braff (CRD #1161062, Registered Principal, Holtsville, New York) was fined $25,000 and suspended from association with any FINRA member in any capacity for two years. The NAC imposed the sanctions following appeal of an Office of Hearing Officers (OHO) decision. The sanctions were based on findings that Braff failed to notify his member firms, in writing, of his outside brokerage accounts and failed to notify the executing member firms, in writing, of his employment at other member firms. The findings stated that Braff falsely represented to the firms with which he was registered that he did not have any outside brokerage accounts on firm disclosures and questionnaires.

Braff appealed the decision to the SEC and the sanctions are not in effect pending the appeal. (FINRA Case #2007011937001)

Scott Thomas Brandt (CRD #1211417, Registered Representative, Woodland Hills, California) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $67,909.21, which includes a $57,909.21 disgorgement of commissions received, and suspended from association with any FINRA member in any capacity for 18 months. The fine must be paid either immediately upon Brandt’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Brandt consented to the described sanctions and to the entry of findings that he provided written notice to his firm that he was engaged in sales of secured real estate notes outside the regular course and scope of his employment with the firm. The findings stated that at that time, the firm failed to recognize that the notes were securities and allowed Brandt to continue selling them without further supervision. The findings also stated that Brandt again disclosed his sales of the notes on his annual Outside Business Questionnaire (OBQ) form, following which the firm determined that the notes were actually securities and ordered him to stop selling the notes and remove any mention of note sales from his

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OBQ; Brandt subsequently submitted a new OBQ devoid of any mention of note sales. The findings also included that Brandt sold a note to a customer and received a commission of $3,459.21 for the sale although he failed to obtain the firm’s prior written approval to sell the note.

FINRA found that Brandt sold additional notes to other customers without receiving any compensation for those sales and obtaining the firm’s prior approval. FINRA also found that the total value of the notes Brandt sold, after submitting the new OBQ devoid of any mention of note sales, was $637,293.21. In addition, FINRA determined that Brandt recommended and sold notes totaling $805,000 to other customers who were referred to him without having reasonable grounds for believing that his recommendations were suitable for these customers. Moreover, FINRA found that Brandt failed to obtain information about these customers’ investment objectives, risk tolerances, financial circumstances or other information upon which he could reasonably base a suitability determination. Furthermore, FINRA found that Brandt relied upon representations from the referring individuals that they had analyzed the customers’ profiles and determined the notes to be suitable for the customers. The findings also stated that Brandt received at least $54,450.00 in commissions for these sales.

The suspension is in effect from June 20, 2011, through December 19, 2012. (FINRA Case #2009017603801)

Michael Lee Bullock (CRD #35037, Registered Principal, Westlake Village, California) was fined $25,000, suspended from association with any FINRA member in any principal capacity for 30 days, and required to requalify by exam as a principal before acting in any principal capacity. The NAC imposed the sanctions following appeal of an OHO decision. The sanctions were based on findings that Bullock accepted compensation directly from a mutual fund company in connection with the sale of its mutual funds, but he failed to notify or otherwise advise his firm before depositing it; Bullock prevented his firm from supervising his receipt of the money, enforcing its own procedures and reflecting the funds on its books. The findings also stated that Bullock failed to detect his firm’s double-payment, which enabled him to profit monetarily (albeit not intentionally) from his actions. The findings also included that Bullock misrepresented and omitted material information in written communications with customers. The NAC found that in response to a direct request from a customer for disclosure of all matters that may impact services or performance or the public perception thereof, Bullock failed to disclose that he and his firm were under FINRA investigation, thereby negligently misrepresenting facts. The NAC dismissed allegations that Bullock violated NASD rules by sharing in directed brokerage commissions or requesting or arranging directed brokerage conditioned upon mutual fund sales.

The suspension is in effect from July 18, 2011, through August 16, 2011. (FINRA Case #2005003437102)



August 2011

Timothy D. Camarillo (CRD #5205051, Registered Representative, San Antonio, Texas) submitted an Offer of Settlement in which he was fined $10,000, suspended from association with any FINRA member in any capacity for four months, and ordered to pay $13,000 in restitution to a customer. The fine and restitution must be paid either immediately upon Camarillo’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the allegations, Camarillo consented to the described sanctions and to the entry of findings that he entered into a contract with a company to sell its private placements, and sold approximately $370,000 of these private securities to his customers, receiving over $13,000 in commissions, without providing notice to, or receiving approval from, his member firm. The findings stated that Camarillo’s firm’s written procedures, which he attested to reading and understanding, instructed employees to provide notice to the firm’s compliance department and to seek the firm’s written approval prior to engaging in any securities transactions not executed through the firm. The findings also stated that the company provided Camarillo with sales literature, and without submitting the brochure to his firm for approval, he distributed the brochure to his customers; the brochure contained several unwarranted, exaggerated and misleading statements, omitted material facts and ignored risk while guaranteeing success. The findings also included that Camarillo did not have a reasonable basis to recommend that his customers purchase the securities, had no experience selling these types of products and did not conduct proper due diligence.

FINRA found that Camarillo did not sufficiently understand the products offered through the company or how the investments were managed; all of Camarillo’s customers who invested in the products informed Camarillo that they were seeking preservation of capital and viewed the investments as a retirement investment. FINRA also found that because Camarillo did not investigate the claims made in the sales literature that the returns were guaranteed, he had no basis to recommend the investment to customers seeking preservation of capital, and his recommendations to invest in the company were unsuitable. In addition, FINRA determined that Camarillo’s customers lost tens of thousands of dollars by relying on his recommendation, because even after partial reimbursement from the company’s court-ordered receivership, Camarillo’s customers only recouped 69 percent of their investment. Moreover, FINRA found that the products, as marketed, were securities, the sale of which required Camarillo to possess a Series 7 license; at the time he sold the securities, Camarillo held only a Series 6 license.

The suspension is in effect from June 20, 2011, through October 19, 2011. (FINRA Case #2010023612301)

Eric Allan Carr (CRD #5698243, Registered Representative, Dickinson, North Dakota) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for six months. The fine must be paid either immediately upon Carr’s reassociation with a FINRA member



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firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Carr consented to the described sanctions and to the entry of findings that he failed to disclose a material fact on his Uniform Application for Securities Industry Registration or Transfer (Form U4).

The suspension is in effect from June 20, 2011, through December 19, 2011. (FINRA Case #2010022119701)

David Lee Cheviron (CRD #4031542, Registered Principal, Massillon, Ohio) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Cheviron consented to the described sanction and to the entry of findings that without permission or authority, he wrongfully converted a total of $75,331.08 from customers. The findings stated that Cheviron did so by withdrawing funds from a customer’s bank account and then took the funds to another branch of the bank, where he deposited the funds into his own personal account; he ultimately used the customer’s funds to make home improvements to his personal residence. The findings also stated that Cheviron’s member firm compensated the customer for the funds wrongfully taken from her account; Cheviron has not reimbursed his firm. The findings also included that Cheviron caused other customers to sign distribution requests to an insurance company with instructions to mail checks to Cheviron’s attention at several banks and his personal residence. FINRA found that upon receipt, Cheviron deposited these funds into his personal bank accounts and used the funds for his personal benefit. FINRA also found that in an effort to conceal that he was the beneficiary of the customers’ funds, Cheviron created false account statements, which he provided to one of the customers. (FINRA Case #2010022831701)

Robert Laurence Cochran (CRD #3002144, Registered Representative, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $10,000 and suspended from association with any FINRA member in any capacity for one year. The fine must be paid either immediately upon Cochran’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Cochran consented to the described sanctions and to the entry of findings that he effected unauthorized transactions in the joint account of customers at his member firm. The findings stated that one of the customers complained to Cochran concerning the unauthorized activity in his account, and in an attempt to placate the customer, Cochran provided the customer with checks totaling $70,000; the checks were returned for insufficient funds. The findings also stated that Cochran’s attempt to settle the customer’s claims was made without the firm’s knowledge or consent.

The suspension is in effect from June 20, 2011, through June 19, 2012. (FINRA Case #2009018883101)

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John Ross Cocozza (CRD #2909926, Registered Representative, Matawan, New Jersey) submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the allegations, Cocozza consented to the described sanction and to the entry of findings that he engaged in outside business activities without providing written notice to his member firm. The findings stated that the firm’s policies and procedures prohibited its employees from engaging in outside employment or business ownership without prior written approval from a firm supervisor or the firm’s compliance department. The findings also stated that Cocozza failed to respond to FINRA requests for information, documents and to provide on-the-record testimony. (FINRA Case #2009020390701)

Martin Robert Coyne (CRD #2401192, Registered Representative, Pittsburgh, Pennsylvania) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Coyne consented to the described sanction and to the entry of findings that he persuaded an elderly customer, in a meeting with the customer and a relative, to write a $50,000 check made payable to an affiliate of Coyne’s member firm and sign documents that purported to relate to a variable annuity investment, but Coyne never submitted the documents to his firm and the check was never cashed. The findings stated that in furtherance of his deception, Coyne misled the customer by informing him that the non-existent variable annuity contract was deemed unsuitable for him due to his age and persuaded the customer to instead invest in Coyne’s non-existent company. The findings also stated that the customer, unbeknownst to his relative, wrote Coyne a $50,000 check payable to “cash,” which Coyne deposited into his personal bank account for the personal use of Coyne and his sibling, without the customer’s authorization. The findings also included that Coyne had the customer sign a bogus agreement that purported, among other things, to guarantee a signing bonus and the greater of a five percent return on investment of the amount earned based on a particular annuity product, for a minimum three-year investment, plus return of the principal invested, all purportedly tax-free. FINRA found that a few months later, the customer’s relative, still thinking that the customer had invested in a variable annuity, asked Coyne about the performance of the annuity, and Coyne several times provided the relative with fictitious annuity statements purporting to relate to the non-existent variable annuity investment. In addition, FINRA determined that by falsifying records, Coyne, in the conduct of his business, failed to observe high standards of commercial honor and just and equitable principles of trade. (FINRA Case #2011026880701)

James Patrick Cross (CRD #1946579, Registered Representative, Nossegem, Belgium) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Cross failed to respond to FINRA requests for information and documents regarding his sale of certificates of deposit (CDs). (FINRA Case #2010025127301)



August 2011

Michael James Dwyer (CRD #1070151, Registered Representative, New Berlin, Wisconsin) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for three months. The fine must be paid either immediately upon Dwyer’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Dwyer consented to the described sanctions and to the entry of findings that he willfully failed to timely disclose material information on his Form U4. The findings stated that Dwyer completed compliance questionnaires for his member firms in which he falsely stated he understood his obligation to notify the firm of any change to his Form U4, including any liens. The findings also stated that one of Dwyer’s firms received credit reports that showed the lien was still outstanding, and the firm’s management and CCO specifically instructed him to disclose the lien on his Form U4, but he failed to do so at that time.

The suspension is in effect from June 20, 2011, through September 19, 2011. (FINRA Case #2009018215801)

Michael Troy Fant (CRD #1053174, Registered Representative, Wolverine Lake, Michigan) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 20 business days. The fine must be paid either immediately upon Fant’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Fant consented to the described sanctions and to the entry of findings that he exercised discretion in various broker-dealer and investment advisory customer accounts without the customers’ written authorization and without the firm’s acceptance of the accounts as discretionary. The findings stated that in a letter to his firm, Fant admitted that he was unaware that he had to talk with customers before effecting trades, and that he had violated the firm’s and its investment advisory affiliate’s policies and procedures regarding exercising discretion in customer accounts. The findings also stated that Fant asserted that his customers understood and verbally acknowledged that he would effect transactions in their respective account without prior consultation. The findings also included that based upon Fant’s written statement to his firm, he acknowledged his exercise of improper discretion in the majority of his broker-dealer and investment advisory accounts during the entire period of his employment with the firm and its investment advisory affiliate. FINRA found that Fant’s conduct also violated the firm’s and its investment advisory affiliate’s written policies and procedures, which prohibited registered representatives and registered investment advisors from exercising discretion in customer accounts without the firm’s or affiliate’s approval and the customer’s written authorization.




August 2011

Joshua Albert Galiani (CRD #2864225, Registered Representative, Pelham Manor, New York) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Galiani engaged in an investment strategy that resulted in a principal loss of $662,108 in an elderly customer’s accounts and provided fictitious account documents to the customer to hide the substantial losses in the account. The findings stated that Galiani made material false oral representations to the customer concerning the value of his investments and repeatedly told the customer to disregard the confirmations and statements sent to him by Galiani’s member firm. The findings also stated that Galiani claimed that the majority of the customer’s money was held in a third account, which he described to the customer as an institutional account that was not reflected on documents sent by the firm. The findings also included that the customer subsequently demanded that Galiani provide him with statements for the institutional account; Galiani created and provided the customer with fictitious firm account summaries that overstated the customer’s actual holdings at the firm by approximately $600,000. FINRA found that on the same date, Galiani created and provided the customer with a fictitious account statement for the institutional account reflecting a purported value of $682,861.55. FINRA also found that the institutional account was a complete fabrication by Galiani; no such account existed and the account number listed on the institutional account statement was related to a closed account previously held by one of Gialani’s relatives. (FINRA Case #2009017619001)

Richard A. Garaventa (CRD #3101772, Associated Person, Staten Island, New York) submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the allegations, Garaventa consented to the described sanction and to the entry of findings that while employed by his member firm’s New York Positions Services (NYPS) Group, which was responsible for processing corporate actions, he misappropriated customer funds from unreconciled suspense accounts at the firm. The findings stated that Garaventa entered, or caused to be entered, numerous false journal entries into the firm’s electronic system to transfer and credit at least $59,349 of unreconciled customer funds to other NYPS suspense accounts that Garaventa was using to misappropriate funds. The findings also stated that Garaventa misappropriated customer funds from an SEC settlement fund by entering, or causing to be entered, numerous false journal entries into his firm’s electronic system to credit SEC checks totaling approximately $120,395 to the other NYPS suspense accounts he was using to misappropriate funds. The findings also included that Garaventa entered, or caused to be entered, into the firm’s electronic system check requests against the suspense accounts that Garaventa was using to misappropriate funds; in this way, Garaventa misappropriated at least $179,744 of customer funds for his own benefit.

FINRA found that Garaventa misappropriated funds from the firm by entering, or causing to be entered, numerous false journal entries into the firm’s electronic system to transfer and credit approximately $1,786,052 from different firm sources, including the firm’s Fee



August 2011

and Foreign Exchange accounts, leftover balances from corporate actions and accumulated American Depositary Receipt (ADR) fees, commingled with funds from other sources, to the NYPS suspense accounts; Garaventa then entered, or caused to be entered, into the firm’s electronic system check requests to be issued against those funds. FINRA also found that Garaventa misappropriated funds from a firm counterparty; the counterparty calculated a payment to the firm related to a corporate action based on an incorrect tax withholding rate, which resulted in a $1,000,000 overpayment by the counterparty, which was credited to an NYPS suspense subaccount. In addition, FINRA determined that Garaventa misappropriated approximately $320,422 of the $1,000,000 overpayment by entering numerous false journal entries into the firm’s electronic system, transferring the funds to other NYPS suspense accounts that he was using to misappropriate funds, and caused checks to be issued against those funds by having NYPS employees who reported to him enter check requests on his behalf, which Garaventa approved and used the identification number and password of another NYPS employee who reported to him to enter check requests; one of the checks contained funds from other firm sources.

FINRA found that Garaventa misappropriated an additional $228,031 from other undetermined sources by entering numerous false journal entries into the firm’s electronic system to transfer those funds to other NYPS suspense accounts he was using to misappropriate funds, and caused checks to be issued against those funds, which had been commingled with funds from other sources. FINRA also found that Garaventa issued, or caused to be issued, approximately 50 false check requests and entered, or caused to be entered, hundreds of false journal entries in the firm’s systems to foster his misappropriation of funds from the firm, its customers and a firm counterparty. Moreover, FINRA found that Garaventa failed to respond to FINRA requests for information. (FINRA Case #2009017072301)

Timothy Jay Geidel (CRD #1319363, Registered Representative, Hamburg, New York) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Geidel consented to the described sanction and to the entry of findings that he failed to fully respond to FINRA requests for information. (FINRA Case #2010024194801)

James Spottswood Gibson (CRD #1709647, Registered Representative, Leola, Pennsylvania) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 10 business days. Without admitting or denying the findings, Gibson consented to the described sanctions and to the entry of findings that he met with customers of his member firm to discuss their joint securities account, which had sustained losses. The findings stated that at the meeting, Gibson gave them a check for $10,000 drawn against a personal bank account Gibson owned. The findings also stated that in issuing the check, which the customers negotiated, Gibson shared in losses the customers had sustained in their joint account at Gibson’s firm.

http://disciplinaryactions.finra.org/CaseDetailRecords.aspx?CaseNB=2009017072301http://disciplinaryactions.finra.org/CaseDetailRecords.aspx?CaseNB=2009017072301http://disciplinaryactions.finra.org/CaseDetailRecords.aspx?CaseNB=2010024194801


August 2011

The suspension was in effect from July 5, 2011, through July 18, 2011. (FINRA Case #2009019827801)

Kevin Mark Glodek (CRD #2419411, Registered Representative, New York, New York) was fined $25,000 and suspended from association with any FINRA member in any capacity for six months. The U.S. Court of Appeals for the Second Circuit denied Glodek’s petition for review of the SEC’s Opinion and Order, which sustained the NAC’s decision. The sanctions were based on findings that Glodek made material misrepresentations to customers in connection with the sale of stock. The findings stated that the misrepresentations included predictions of the future price of a stock, the issuer’s imminent listing on the American Stock Exchange, that the issuer was a debt-free company and false earning projections for the company.

The suspension is in effect from July 18, 2011, through January 17, 2012. (FINRA Case #E9B2002010501)

John Edward Good Jr. (CRD #1429908, Registered Representative, Memphis, Tennessee) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for one month. The fine must be paid either immediately upon Good’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Good consented to the described sanctions and to the entry of findings that he borrowed approximately $1,500 from his customer at his member firm without disclosing the loan to his firm. The findings stated that the loan was not reduced to writing and had no repayment terms; Good paid back the customer. The findings also stated that the firm had a policy prohibiting representatives from borrowing money from customers. The findings also included that Good completed a field inspection report in which he falsely stated to the firm that he had not borrowed money from any customers.

The suspension was in effect from June 20, 2011, through July 19, 2011. (FINRA Case #2010023094301)

Kirk Loring Gravelle (CRD #2580309, Registered Representative, Macclenny, Florida) was fined $10,000, suspended from association with any FINRA member in any capacity for five business days and required to requalify by examination. The sanctions were based on findings that Gravelle mismarked cus

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